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Friday, 23 February 2018

ICO Analysis: Is Sentinel Chain worth investing in?

The latest crypto project aiming to provide financial
services to the world’s unbanked and underbanked.

One of the
latest hyped crypto projects is Sentinel
Chain, which is a Singapore-based ICO due to open their public crowdsale
next month. There’s presently a lot of interest as Sentinel Chain is a partner
of Vechain, which is arguably the #1 supply-chain crypto right now.

If Sentinel
Chain is successful, they’ll help play a crucial role in reducing the world’s
income inequality and lead rural farmers to greater economic prosperity. How do
they intend to achieve this? Read on to find out!

Disclaimer: I’m heavily vested in Vechain. This is my personal
take (together with my friend, Tim) on the upcoming Sentinel Chain ICO and
should not be miscontrued as financial advice. Please do your own due diligence
before investing in anything, especially in high-risk assets like
cryptocurrencies.

What is
the problem Sentinel Chain is trying to solve?

Financial
lending and credit is generally based on collateral. When you borrow from a
bank or financial institution, they will assess your financial standing by
looking at your income earnings, assets owned (stocks, property, insurance) and
other factors before granting you a loan. However, a large portion of the world
does not have access to such financial services because they do not have such
collateral.

70% of the
world’s global food production is sourced from small-scale agricultural
farmers, but these same farmers are concurrently among the largest population
segment globally who live on less than USD 2 a day. They may own land and
valuable livestock, but are generally denied of financial credit and borrowings
for their operations and scaling because their assets are generally classified
as “dead capital” in the financial economy.

Most financial providers can only accept the livestock as a
collateral for loan if the livestock is insured. However, insurance companies
today are mostly unable to offer livestock insurance at affordable premiums
because there is no “tamper-proof” identification systems to guarantee the
identity and ownership of the livestock.

The Solution

Livestock will be tagged with a physically tamper-proof identity tag
(through a single-use RFID chip which cannot be removed without being destroyed)
and the identity data will be stored on the blockchain where it is
digitally-immutable (i.e. pretty much impossible to alter the data). Together
with the time-series transaction ledger, this “digital passport” will prevent
fraud, and allow insurers to assess the data to verify these assets for
insuring. They’ll be able to check on the blockchain if that livestock has
already been pledged as well, providing a trail of credit history.

Once the livestock is insured, the banks and financial lending
institutions can now accept it as collateral to grant loans to these farmers.
What was previously “dead capital” can now be monetized thanks to the Sentinel
Chain blockchain ecosystem and partnerships.

The CrossPay app is an Android mobile wallet that will provide the
unbanked with quick access to their balances and allow for quick transactions.
The blockchain will be deployed locally at the grassroots level, and the
cryptocurrency to be used in the system is called the Local CrossPay Token
(LCT), which will be pegged to the value of the country’s native currency. LCT will thus not be exposed to the volatilty of the cryptocurrency markets.

Partnerships

How impressive is the team behind Sentinel Chain?

The team spearheading Sentinel Chain have strong credentials and
I’ll highlight a few prominent individuals:

Roy Lai, Founder
Has over 20 years of experience in IT and finance. Was previously responsible
for leading the successful implementation of FAST (yes, that same inter-bank
FAST transfers that we now use on a regular basis!) connecting 14 banks in
Singapore.

Chia Hock Lai, Council
Member
The founding president of the Singapore Fintech Association.

Anson Zeall, Council
Member
Chairman of ACCESS, Singapore’s Cryptocurrency and Blockchain Industry
Association. Is also an instructor of the fintech and blockchain workshop for
the Asian Development Bank and other banks in SEA.

Zann Kwan, Council Member
Previously Vice-President of GIC, and her team brought in Singapore’s first
public bitcoin machine.

David Lee, Senior Advisor
The famed SMU professor who promoted Bitcoin years before it gained mainstream
media traction.

It is not every
day I come across a crypto project with a team as impressive as this one, and
given their extensive experience and connections in the financial space, that
could give them a huge advantage in securing the partnerships needed to make
this project a success.

What’s the value of the SENC token?

The utility of
the SENC tokens are:

-Used by insurance companies to
purchase LCT to store and access livestock data within the CrossPay blockchain

-Used by local financing
companies to purchase LCT to pay for publishing the collateralized loan
agreements to the local CrossPay blockchain

-Be held in escrow via smart
contracts to minimise counter-party lending risk, so that if the local
financing company defaults, then the escrowed SENC will be released to the
overseas financing company to be liquidated for funds and loan repayment

-Fundraising for local community
projects through peer-to-peer crowdfunding platforms, including for
humanitarian aid, disaster relief, and more.

I managed to find secondary data sources confirming the various
partnerships and pilots that were Sentinel Chain claims in their whitepaper.

CrossPay
was deployed as a pilot trial with local dormitory operator TS Group last
quarter (Q4 2017) at a supermarket, where migrant workers were able to make
e-payments. I asked the Sentinel Chain team for the results of this pilot and
was told that they’ll publish it much later, so this impacted my confidence in
the project somewhat as it would have been better if we already had those
results to assess.

Since most of these
agricultural farmers will be out in the rural areas and are already poor
without Internet access or smartphones, how will they be included in this
solution?

Upon
discussion with my friend Tim, we realised that there is a crucial misunderstanding
of the markets here. For instance, Sentinel Chain’s target market in Myanmar
already has 4G networks available, and the costs of a smartphone is about $30.

Why partner with a China insurer and a
Southeast Asian bank? Why not partner with insurers who can cater to the
unbanked and underbanked here in Southeast Asia first?

Roy Lai: Because there isn’t many. To access an affordable microinsurance service
is not easy. It requires a large scale of members in order to diversify the
risk. The China mutual insurance (Zhongtopia) has a 10 million customer base
that pays 7 rmb premium and insured for 300,000 rmb.

Me: Will Zhongtopia be able to insure livestock of countries outside of
China then, or is your partnership with them only for the China markets for
now? If it's only for China, when will the tentative pilot and roll-out be for
livestock in rural China?

Why was CrossPay’s first pilot test run
on migrant workers in Singapore, instead of an agricultural pilot in either
Bangladesh or Vietnam to provide an indication to investors who can then
evaluate the project’s potential success in the future when rolled out on a
greater scale?

Roy Lai: CrossPay’s pilot for Singapore
utilises only the payment function which is only a part of the CrossPay’s
functionality. The strategic value in doing it in a Singapore foreign worker’s
dormitory is that as the hub of Asia it has workers from all parts of Asia, and
is easier to solve the user experience problem simultaneously across different
nationalities without going through country by country.

Is the technology for the tamper-proof
RFID tags already ready? Who will be manufacturing and providing these tags?
Who will bear the costs of these RFID chips and be responsible for implanting
it into the livestock?

Roy Lai: Yes. We have an extensive R&D partnership with another Singapore
company to design the tag for blockchain use. The costs of these RFID chips are
born by the insurance and loan companies. We work with partners that has
extensive agent network on the ground to manage the last mile deployments. We
will not be able to share the name of the Singapore company designing and
manufacturing the RFID chips without NDA.

You can also check out
their Livestock RFID Tag Demo using CrossPay here:

Will there be a limit to the number of
LCT tokens issued in each local country? How will the team differentiate
between LCT tokens for the Bangladesh market vs. the Thailand markets, for
instance?

Roy
Lai: LCT tokens issued in
each local country has no limit but a conversion between SENC and LCT is
required. LCT tokens for different market are derived from USD exchange rate
for the fiat vs the USD exchange rate for SENC token.

How will Sentinel Chain decide how
many to issue (i.e. the number of LCT tokens then per country?) Any metric or
guideline would be helpful.

Roy Lai: Not without NDA.

Has Sentinel
Chain secured any government agreements or discussions to roll this out for
their country’s agricultural population thus far?

Roy Lai: Further news to be announced. The aim is to announce before the ICO
crowdsale closes.

I
understand that a partnership agreement was signed with CloudWell, and the same
article written by Anne mentioned Green Delta as the local insurance partner.
Can you clarify if Green Delta has officially agreed to partner and insure the
Bangladeshi livestock that will be placed on Sentinel Chain's blockchain, or
are they merely a partner of CloudWell that you were referencing?

Roy
Lai: This is a tripartite partnership with Cloudwell
providing the last mile support, Green Delta as the livestock insurance
provider and InfoCorp providing the CrossPay network.

Future Use Cases

Rather than
solely monetizing dead capital to allow for financial inclusion of the
unbanked, SENC also seeks to develop the following use cases. One of them which
we were highly supportive of was the use of SENC for community projects. The
users that SENC targets are the very same exact individuals who are
disadvantaged in their access to basic infrastructure such as electricity,
roads or clean water. Through the SENC Blockchain, third party not-for-profit
organisations may purchase SENC as a medium of exchange for LCT to finance
social inclusion activities such as building of infrastructure, to sending
donations and offering financial aid through fundraising platforms which
Sentinel Chain is looking to develop in future.

TLDR Conclusion

I've also separately met up with another staff working on Sentinel Chain (Jackie), and asked about the project. After this in-depth review, it is safe to say that I'll be putting some ETH into this.

If you've any further thoughts on Sentinel Chain to add on, I'll love to hear them!

P.S. This is NOT a sponsored article. The full research was conducted together with my good friend in crypto, Timothy Ng Wen Jun. Thanks for all your help!

Those are useful metrics for evaluating stocks for sure, but I think we need to be mindful that crypto projects and ICOs cannot be measured by the same standards, because in that case then almost 99% of all crypto investments will fail. What's the business model of Bitcoin or Ethereum? Does the founding team or developers charge a commission for transactions? What's their team's resume? Do they even have 20 years of experience in their field? What target markets or partnerships do they have?

If an investor seeking to purchase Ethereum at ICO used those metrics, he would never have put in his money cos it would have fallen short of such an evaluation. But look at Ethereum now.

Sentinel Chain's business model has been clearly put out in their whitepaper which I've also elaborated on this article, whereas ROI should be reviewed based on their tokenomics and not the traditional % gain on operating capital. They do not sell RFID tags, it's been stated that it is their partner who will be responsible for that. Target markets have been identified as Asia, particularly the rural communities with Bangladesh roll-out as the first step it seems given existing partnerships and based on their CEO statements.

We'll be hard-pressed to even find a resume of founders this good in the crypto projects space. Heck, even Vitalik himself didn't have as splendid a resume when he started, but look at Ethereum's performance since ICO lol.

based on what you said, it's just speculation and hope like thousands of coins out there. Bitcoin why does it exist ? Who knows? the founder didn't even own up. Perhaps to make themselves rich? If they own a few bitcoin at the start and managed to hype it all up .. they are rich liao...

Most of the coins is to make the founders rich. Look at Ripple, the founders own the majority .. one of the founders left and is slowly selling to cash out ..

anyway livestock tagging doesn't need blockchain .. RFID tagging exists long ago and it's doing well without the use of blockchain . Many people are just using BC as a buzzword and forcing the use of blockchain for the sake of riding on the hype.Honestly, cryptos only make the founders and early "investors" rich .. if the crypto can manage to be hyped up .. the ROI is dependent on the level of hype.. which isn't exactly a good kind of biz ..

they have a closed round of founding which I can think of the sales pitch as "wait til the dumb public investors come in and hype up the price " so the early investors in the closed round can cash out unharmed...

Shh! Sometimes I send out secret tips via email.

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You can call me Dawn, and this little space on the Internet is where I write about becoming financially-free. Join me as we learn more about savings, budgeting, paying off debts, insurance and investing together!

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Please note that all statements published on this blog are solely opinions of my own i.e. of a personal nature, and should not in any way be taken as statements of fact. Readers are encouraged to do their own research before arriving at any conclusions based solely on materials provided, or republished, on this blog.